DYOR (Do Your Own Research) is a buzzword in the crypto world that means doing your own research and analysis of crypto projects. For anyone eager to join the market, it is crucial to learn about how to do your own research.
In this article, we will explain why DYOR is so important and how to do your own research.
The term DYOR is used in many fields, but it can be even more important in crypto investing than in the traditional financial market.
As the crypto industry grows, a dizzying array of projects have been created. Blockchain brings not only the freedom of decentralization, but also room for all kinds of scams, which often claim you’ll make high returns on your money.
In late 2016, cryptocurrency investment platform Bitconnect issued 28 million BBC, their utility token, through an ICO(initial token offering) at a price of $0.17. Bitconnect encouraged users to trade crypto assets such as Bitcoin for BBC and lend BBC out to earn interest.
The platform claims to use technologies such as so-called “trading bots” and “volatility trading software”, so they can provide extremely high returns of 1% per day. BitConnect also offered referral commissions to existing investors who referred new investors to the lending program.
Within just one year, BBC climbed to an all-time high of $463, making it the 12th largest cryptocurrency in terms of market cap. But as the scam gradually unraveled, on January 16, 2018, Bitconnect announced its closure and BBC price dived 92% in 24 hours.
Bitconnect is one of the most famous high-yield Ponzi schemes in crypto history, causing losses of up to $3.45 billion in total. In November 2017, Vitalik, the founder of Ethereum, had already accused Bitconnect of being a scam. However, as investors were so overwhelmed by the high returns, they didn’t realize the huge risks behind the yield. In fact, if we look deeper into Bitconnect, it is easy to discover the Ponzi nature of the project.
As the crypto market is in such a mess, is it possible to rely solely on opinion leaders or recommendations by others to make a decision? The answer is no.
The internet is full of misinformation and disinformation, some of which may even be malicious propaganda. People may lose their rationality due to strong FOMO emotions. Therefore, users must do their own research and judge the reliability of information so as to make decisions wisely.
DYOR is closely connected with fundamental analysis, i.e., using multiple methods to figure out the prospect of a project. For project research, it is crucial to gradually develop your own framework through study and practice. Generally speaking, a project can be judged from at least the following perspectives.
Visit the project website, download the white paper, view the roadmap and get to know the members of the team.
Review the website, white paper and roadmap to understand the basic mechanics of the project and think about what is innovative about the project and whether it solves some current problems. You can also use the traditional SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to find the project’s strengths and weaknesses. However, it is important to look into these projects critically. Piling on a lot of trendy terminology doesn’t necessarily mean the project is promising.
In addition, you can look for information about the team members on their official website to find out whether they have used their real names. You can also learn about their previous experience from social media and other sources.
When analyzing the project, you need to focus on the project’s token economics. Specifically, You need to find out how tokens were initially allocated, the supply of tokens, how tokens are issued, what ecological functions the tokens serve, and where the project’s revenue comes from.
Unlike the traditional economy, the blockchain is completely open and transparent. Relevant data can be easily accessed on websites such as Etherscan. For DeFi projects, TVL (total locked-in value) is the most important metric. Other indicators such as the number of active addresses, exchange balance, and network value to transaction (NVT) are also useful metrics.
“Smart Money” means investment from institutional investors. Projects that have received a large amount of institutional investment tend to be more reliable.
A whale refers to the address that holds a large number of certain tokens. Again, due to the transparency of the blockchain, any transaction can be queried on the web. On social media like Twitter, accounts like Whale Alert will monitor and broadcast transfers from these whole wallets, which often reflect the future trends of a project to some extent.
Learn more about fundamental analysis, please turn to our article: What is Fundamental Analysis?
Everyone should do their own adequate research before investing. There may be many “teachers” or “masters” who want to give you advice and guidance on your crypto investment, but you need to know that nothing can replace DYOR.
When you want to DYOR, Gate Learn is the best choice for you to get adequate information about blockchain and project background. Welcome to Gate Learn. Let’s start your crypto journey right now.